Naked Short Seller

Naked Short Seller

An investor who sellsshares that he/she has neither borrowed nor made arrangements to borrow. Under Regulation SHO, naked short sellers must abide by a "locate" requirement and a "close-out" requirement. The locate requirement forces brokers to have reasonable grounds to believe that the short-sold security can be borrowed; the broker must document this prior to the security's sale. With some exceptions, the close-out requirement means that brokers who have failed to deliver a short-sold security for 13 days must purchase similar securities and present those instead. Naked shorting is very high risk.

Additionally, if you purchased shares from a person engaged in naked short selling, you have what might be called "phantom shares" - the shares do not exist since the naked short seller sold shares he did not own.

Naked short selling is simply the short sale of a share that does not exist (as opposed to "short selling" where the actual shares do exist) in hope that the price will go down, allowing the naked short seller to find and then buy stock at a lower price to fill his short order.

OTC:ETMO) ("Extreme" or the "Company") is appealing to shareholders to participate in an effort management believes will significantly increase shareholder value and create a "share vacuum" for illegal naked short sellers.

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